Progress Software Corp (PRGS) Q4 2021 Earnings Call Transcript

Welcome to the Progress Software Corporation Q4 2021 Earnings Call. My name is Darryl and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I will now turn the call over to Michael Micciche. Mike, you may begin.

Okay. Thank you, Darryl. Good afternoon, everyone, and thanks for joining us for Progress Software's Fiscal Fourth Quarter 2021 Financial Results Conference Call. With us today is Yogesh Gupta, President and Chief Executive Officer, and Anthony Folger, Chief Financial Officer. Before we get started, I'd like to remind you that during this call, we will discuss our outlook for future financial and operating performance, corporate strategies, capital allocation, product plans, cost initiatives, our integration of Kemp, the impact of the COVID-19 pandemic on our business, and other information that might be considered forward-looking. This forward-looking information represents Progress Software’s outlook and guidance only as of today and is subject to risks and uncertainties. For a description of the risk factors that may affect our results, please refer to our SEC filings, in particular, the section captioned Risk Factors in our most recent form 10-Q. Progress Software assumes no obligation to update the forward-looking statements included in this call, whether as a result of new developments or otherwise. Additionally, on this call, all the financial figures we discuss are non-GAAP measures, unless otherwise indicated. You can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP numbers in our financial results press release, which was issued after the market close today and is also available on our website. This document contains the full details of our financial results for the fiscal fourth quarter of 2021 and the full fiscal year 2021, and I recommend you reference it for specific details. We also have prepared a presentation that contains supplemental data for our fourth quarter and full fiscal year results, providing highlights and additional financial metrics. Both the earnings release and this presentation are available in the Investor Relations section of our website at investors.progress.com. Today's conference call will be recorded in its entirety and a webcast replay will be available on the Investor Relations section of our website. With that, I will now turn it over to you, Yogesh.

Thank you, Mike. Hello, everyone, and welcome. I'm very excited to be here today to discuss our results for the fourth quarter of fiscal 2021, the capstone to one of the best years ever for Progress. I will also share some highlights of the full year and then talk about the success of our total growth strategy thus far and I will wrap with our outlook going forward. So let's get started. Following three straight quarters in which we beat our estimates and raised guidance, we delivered another standout quarter. Our fourth quarter results exceeded guidance for all metrics and did so without the benefit of timing of revenue recognition or large one-time deals. The results reflect the continued success of our go-to-market strategy and a strong demand environment. Our Q4 and fiscal 2021 outperformance was evident across the board in virtually all of our product lines and across all geographies. We benefited from the generally strong economy, as well as from the renewed IT budgets of our customers. For example, a global financial organization significantly expanded its use of Chef with a seven-figure expansion deal. And Telerik DevTools closed the largest deal in its history. Sites new to cloud continue to see increasing adoption, winning customers across industries such as manufacturing, retail, and finance. WhatsUp Gold took advantage of opportunities presented by customers seeking alternatives in network monitoring solutions, enabling it to build on the positive momentum from prior quarters. This strong, unprecedented demand and excellent sales execution, along with the contribution of Kemp, built on our growth trend for annualized recurring revenue or ARR, which grew by over 12% this quarter. We exited the year with $486 million in ARR, and our net dollar retention rate was again above 100% as customers remained committed to our products, and in many cases, expanded their use. Another Q4 highlight was our acquisition of Kemp in November. Kemp provides us with the best application experience and load balancing products on the market along with a long list of great customers and strengthens our already deep bench of talented engineers and salespeople. The Kemp integration is off to a great start, and without disrupting Kemp's business, we achieved significant integration milestones in the first 30 days after closing. I'm confident that as with Ipswitch and Chef before it, Kemp will exceed our expectations on value creation for our shareholders. As excited as we are about Kemp, we're already looking forward to repeating the success of our total growth strategy by executing on our next opportunity to create and return meaningful value to our shareholders. Let me now share some details of what made FY2021 such a strong and, in many ways, unprecedented year of success for Progress. Throughout fiscal 2021, we saw a sustained level of increased demand for our products. Our sales and product teams seized the opportunity presented by this increased demand, enabling us to beat and raise guidance this quarter. Some of this demand was indeed pent-up from COVID, but by offering the best products to develop, deploy, and manage business applications in an ever-changing business climate, we were positioned to capitalize on that demand, and this demand remained strong into the New Year. Fiscal 2021 was indeed an extraordinary year. While OpenEdge remains our workhorse and the customers who use it are extremely loyal and sticky, we saw strength across all of our products with marquee wins for Chef, DataDirect, Sitefinity, WhatsUp Gold, Telerik DevTools, and others. None of this would have been possible without our amazing team. The lingering pandemic has been extremely challenging for everyone, but at Progress, our people have worked hard with dedication and commitment to excel in the face of ongoing adversity. The talented Progress team remains highly motivated and highly effective, and I could not be prouder of them for their performance in 2021. This dedication translated to our being recognized as an employer of choice around the globe. For the first time in our history, Forbes magazine named Progress as one of America's best mid-sized employers and named us the best company to work for in Bulgaria, where we have nearly 500 employees. The Boston Globe and the Boston Business Journal both put Progress on their exclusive best places to work list. And we again won two Stevies in the 2021 American Business Awards, including the Gold Award for our corporate social responsibility program. Let me now reflect a bit on what we have accomplished since we launched our total growth strategy three years ago. We launched this ambitious strategy with the goal of increasing shareholder value through a highly disciplined M&A strategy. At the same time, we committed to strengthening our highly profitable businesses while remaining intensely focused on operational excellence with the objective of doubling our revenues in five years. To date, we are ahead of plan on executing our total growth strategy. Three years into it, our revenue is up approximately 60% and EPS has increased nearly 70%. When we launched the strategy, our target was to sustain operating margins above 35% with the goal of increasing margins as we scaled up our business through acquisitions. We have continued to exceed 35% margins since then, including operating margins of 40% in fiscal 2020, 41% in FY2021. Both of these years were aided by COVID's impact on spending, but we are still forecasting margins of 39% for fiscal 2022. There aren't many software companies that are able to balance the goals of growing revenue and doing so profitably as effectively as we have shown. In addition to growing our revenues and margins, our acquisitions have also made our product portfolio even more robust. Today, we're proud to provide the best products to develop, deploy, and manage high-impact applications and experiences. WhatsUp Gold from the Ipswitch acquisition and Flowmon and LoadMaster, which came from the Kemp acquisition, are the best-in-class offerings to manage and ensure the delivery of application experiences. They provide full stack observability and automate optimum performance of modern applications. Chef is the leading product for DevOps and DevSecOps being used by a growing number of enterprise customers to secure and automate the deployment of their cloud and on-premises infrastructures. The secure and highly performing data movement capability of Ipswitch's MoveIt complements the high-performance, secure, and reliable data access capabilities of our DataDirect, enabling customers to access and move data from anywhere to anywhere. Our Telerik and Kendo UI products continue to innovate, leading the market in making it easy for developers to build amazing user experiences. OpenEdge continues to power business applications for more than 1,500 ISVs and thousands of other enterprises. Our product portfolio has never been stronger or more relevant than it is today. A key to our total growth strategy remains acquiring great businesses at the right price. We're extremely disciplined in our M&A strategy. Returns on our two prior transactions exceeded even our most optimistic projections and offer proof points that we can deliver returns that significantly exceed our cost of capital, and we are well on our way, with Kemp, to achieving the same results. The M&A market remains very promising, and we are actively seeking opportunities to put capital to work even in the current hypercompetitive market. Our corporate development team continues to vet dozens of candidates each quarter. We believe the best way to create solid returns for shareholders is to keep making disciplined acquisitions while leveraging operational synergies among the products, technology, and customers we acquire. Now moving on to fiscal year 2022. We expect demand to continue to be robust. We're off to a good start as our customers continue to invest in their existing Progress infrastructure and have the willingness and capacity to do so. As always, we are grateful to our loyal customers, shareholders, and employees for their hard work and dedication especially in these difficult times. As Anthony will explain, we remain very optimistic about our future prospects. With that, I will turn it over to Anthony for the financial overview and our forward outlook.

Thanks, Yogesh. Good afternoon, everyone. Thanks for joining our call. As I'm sure you heard in Yogesh's remarks, we're very pleased with our performance in the fourth quarter, with results exceeding the high end of our guidance range on every financial metric. We're also delighted to close the acquisition of Kemp, and we're pleased with the progress of the integration to date. Turning now to the numbers and starting on the top line, our revenue for the quarter of $143.7 million represents 11% growth over the prior year, reflecting stronger than anticipated demand for our OpenEdge, DataDirect, Chef, and DevTools products. In addition to strong operating results, we closed the Kemp acquisition as planned, ensuring Kemp's contribution to Q4 was in line with our expectations. For the full year, revenue of $557.3 million represents 22% growth compared to 2020. This year-over-year growth is comprised of a full-year revenue contribution from Chef, a one-month revenue contribution from Kemp, and growth across multiple other product lines, most notably OpenEdge. Consistent with our growth in revenue, we also saw growth in ARR throughout 2021, closing the year with $486 million of ARR, which represents 12% growth year over year and 3.4% growth on a pro forma year-over-year basis. To be clear, the pro forma results include Kemp in both periods. In addition, our net retention rates showed continued strength in the fourth quarter, once again exceeding 100%. With customer retention rates remaining consistently strong throughout the year and with an improved demand environment fueling growth across our portfolio, we're thrilled with our top-line results for 2021. What's more, as Yogesh mentioned in his remarks, we remain optimistic that some of this increased demand will continue into 2022. Turning to expenses; total costs and operating expenses were $92 million for the quarter, up 14% over the year-ago quarter, and $328 million for the full year, up 20% compared to 2020. For the quarter, the increase in costs and operating expenses was driven by an increase in variable expense associated with our top line over performance combined with an increase in our cost base resulting from the acquisition of Kemp. For the full year, the increase in costs and operating expenses was driven by a full year of activity for Chef and one month of activity for Kemp, as well as increased variable expense associated with our better than expected top-line performance. Operating income for the quarter was $52 million, for an operating margin of 36% compared to $48 million in the year-ago quarter. For the full year, operating income was $229 million for an operating margin of 41%. That's an increase of $46 million or a 100 basis points compared to 2020. Earnings per share were $0.92 for the quarter, an improvement of $0.01 compared to the year-ago quarter, and for the full year, earnings per share was $3.87, an increase of $0.78 or 25% compared to 2020. Moving on now to a few balance sheet and cash flow items. We ended the year with $157 million in cash, cash equivalents, and short-term investments, and approximately $100 million in untapped capacity under our revolving line of credit for total liquidity of $257 million. In addition, we had a debt balance of $627 million, which consists of our term loan in the amount of $267 million and $360 million in convertible notes. DSO for the quarter was 60 days compared to 54 days in the fourth quarter of 2020. The increase in DSO was driven by the timing of billings, with much of our billings upside coming very late in the quarter. Deferred revenue was $252 million at the end of the fourth quarter, up $59 million from a year ago, reflecting the addition of Kemp's deferred revenue and an increase in non-Kemp related deferred revenue. Adjusted free cash flow was $42.4 million for the quarter, up 4% compared to the year-ago quarter, and for the full year, adjusted free cash flow was $179 million. That's an increase of 26% compared to 2020. We did not repurchase any stock during the fourth quarter. As a result, at the end of Q4, we had $155 million remaining under our current share repurchase authorization. Now, I'd like to turn to our outlook for Q1 and the full year 2022. When considering our outlook, it's important to keep in mind the following: 1. First, we expect exchange rates to have a negative impact on our 2022 outlook when compared to 2021. We estimate that the negative impact on our revenue is approximately $7.5 million and the negative impact on our earnings is approximately $0.03 per share. Next, as Yogesh highlighted, 2021 was a year of meaningful top-line growth across virtually all of our product lines. We recognize that some of the demand driving this growth was pent-up COVID-related demand from 2020, but not all of it was. For 2022, although we believe that pent-up demand has dissipated, we do expect continued strength in the demand environment resulting in slight growth from our non-Kemp products, even against our unusually strong 2021. Next, our expectations for Kemp: Kemp's contribution to 2022 has remained largely unchanged from our earlier estimates, and we anticipate a full-year revenue contribution of nearly $70 million. This equates to more than $60 million of incremental revenue compared to Kemp's 2021 contribution. As previously mentioned, we expect the integration of Kemp to continue throughout 2022. As a result, we expect to recognize cost synergies gradually during the year and to exit the year with an operating margin contribution from Kemp of at least 40%. Finally, when developing our outlook, we assumed that some of our expenses related to travel, events, and other in-person activities will increase in the second half of 2022 as COVID restrictions ease and conditions begin to improve. With that, for the first quarter of 2022, we expect revenue between $139 million and $142 million. This includes the full quarter contribution from Kemp and earnings per share of between $0.83 and $0.85. For the full year 2022, we expect revenue of between $605 million and $615 million, representing 9% to 11% growth over 2021. This range reflects the previously mentioned negative impact from foreign exchange of $7.5 million. We anticipate an operating margin for the year of approximately 39% with a slight headwind from the Kemp integration, which will improve throughout the course of the year as I previously noted. We're projecting adjusted free cash flow of between $185 million and $190 million, and we expect earnings per share to be between $3.95 and $4.50. Again, this range reflects the previously mentioned negative impact from foreign exchange of $0.03 per share. Our guidance for the full year EPS assumes a tax rate of 20% to 21%, the repurchase of $50 million in Progress shares, and approximately 44.7 million shares outstanding. Our share buyback activity in 2022 is meant to address dilution from our equity plans. While we believe that share buybacks and dividends can provide shareholders with a good return, our M&A track record over the past three years has delivered superior returns for our shareholders, and for that reason, disciplined, accretive M&A is the top capital allocation priority of our total growth strategy. In closing, I'd like to reiterate that we're thrilled with our Q4 performance, the acquisition and integration of Kemp, and our outlook for 2022. As Yogesh outlined, we believe we are well-positioned operationally and financially to continue executing our total growth strategy to create meaningful value for our shareholders. With that, Darryl, let's open the call for Q&A.

And our first question comes from Ittai Kidron. Go ahead, Ittai.

Thanks. A couple of questions for Yogesh and Anthony. I'll start with you, Yogesh. Maybe from a big picture standpoint, you talked about the demand environment still being very strong. Maybe you could talk about two things. Number one, how is Omicron impacting demand or just kind of out of curiosity? So many people have been hit by this. I guess it's a question of whether you're seeing customers slow down in the way they move forward just because people are missing, are not around. And then second, maybe you could talk about the revenue synergies in Kemp. I would assume that a lot of the progress there is cost-driven first, but maybe you could talk about the cross-selling opportunities there. How far down the road are you in exploiting those?

Ittai, thanks so much and great to have you on the call. Regarding the first question about Omicron, we actually are not seeing any meaningful change in the business trajectory right now. You're right. Obviously, lots of people are getting hit, and when people are unavailable, that sometimes slows things down. But so far, we continue to see good momentum in our business. There is nothing in our business that makes us believe that Omicron is going to have a meaningful negative impact at this point. So again, who knows which way this goes, and how the world changes, and whether it has a more serious impact over the next several weeks or not. But so far, so good, and I think we're really pleased with what we've seen so far in the first six weeks or so. Switching over to the Kemp integration and the opportunity to cross-sell. As you know, and as you yourself highlighted, our approach to this M&A and the total growth strategy is extremely disciplined, where we focus on expense synergies as the primary driver of shareholder value creation. That is where we are heavily focused. It is correct that Kemp products have some interesting synergies in terms of potentially selling together with things like WhatsUp Gold and Flowmon, for example, and so on. But that's much farther down the road. From our perspective, we want to make sure that we execute on the integration, that we make sure that the people come onboard, that the customers continue to move forward, that our retention rates don't suffer, and that the business continues to function well while we put together the expense synergies that we need to have in place as we integrate those businesses. So I would say, Ittai, right now we are not planning any meaningful revenue synergies through cross-sell between those products and ours.

Got it. Very good. And then a follow-up for you, Anthony. Maybe it's me, but it feels like you're certainly focused on M&A as a way to continue driving growth. I guess my question is, the market has contracted quite substantially, especially in growth names and in technology. Are you sensing from your discussions with potential targets that there is now greater flexibility, openness, and perhaps eagerness to engage in deals given the strength of the correction? Has that already influenced the thinking of potential sellers?

Again, it's hard to say, Ittai. I would say that the pipeline continues to be very robust and we are actively managing opportunities just on a continual basis. So there's a lot of activity out there. But yeah, I think for sure the correction in the public markets will trickle into some of the private company evaluations. Frankly, we think that to the extent rates rise a little bit, that may tilt the competitive dynamic back towards us. Money has been so cheap for so long and it's allowed multiples to really push a lot higher than they had been previously, sometimes to a place where we're not willing to go. But I think we're feeling pretty optimistic about how this may present opportunities for us in 2022 and beyond.

Very good. Good luck, guys. Thank you.

And our next question comes from Ken Wong. Go ahead, Ken.

Thanks for taking my question. Yogesh, I wanted to touch on your remarks about the strong demand environment sustaining up. I guess, obviously, given what we've seen in the markets with expectations for software companies, do you feel it's broader software in general where demand is holding up, or more infrastructure where you guys are focused? Any sense from your conversations with customers whether or not it is more of a Progress dynamic?

Thank you for your question. You're correct that not every software company is the same, Ken. From our view and discussions, the focus is mainly on infrastructure-related topics. We believe our product offering now encompasses the entire DevOps cycle of developing, deploying, and managing applications. This includes strong solutions for application experience and excellent offerings for DevOps and DevSecOps. These aspects seem to resonate with our customers, and we are seeing demand in that area. Regarding packaged applications, we aren't well-positioned to assess whether they are experiencing strong or weak demand, so I can't comment on that. However, from our standpoint, demand continues. Aside from some of the pent-up demand from COVID, the rest appears to be a robust demand environment, and I'm confident about our business outlook.

Got it. And I think you mentioned Chef in the largest deal in history, if I heard correctly. Would you associate that with it being part of Progress, and perhaps your sales force and your scale helped deliver those kinds of higher deal sizes? Or is this more just a large customer came in and obviously delivered a large signing? Any color in terms of maybe some of the drivers that got you to that level?

Just to clarify, the Chef deal was a large deal; it was a seven-figure expansion, but it was not the largest deal in Chef's history. The largest deal in one of our products' history was around our DevTools products, which also had another seven-figure deal. The Chef deal was significant; a large financial institution had been a user of Chef, and we delivered new capabilities that allowed them to develop new use cases across their global enterprise, resulting in this large seven-figure deal with us for Chef. Could Chef have done this on its own? I don't know. One of the things that we have done is actually put more resources on the product side in Chef than even Chef had by itself. We've been able to do that because we have shifted a significant amount of those costs to India. While the costs are significantly less, the actual number of people on the product is significantly greater. We've been able to serve our enterprise customers' needs as well as the needs of the open source community very well by doing this. I believe this focused investment and effort around solving enterprise customers’ problems, along with attention to the open-source community, has served us well and I continue to be extremely excited about its future prospects.

Got it. And then maybe the last one if I could sneak this one for Anthony. Revenue growth next year, 8% to 10%, and I know ARR is not really an area that you guys guide on. But is there any way to think about whether or not there are headwinds or tailwinds that would move that number higher or lower than the revenue range that you guys had already put out?

You're correct; we are not guiding on ARR yet at this point, but we've provided the pro forma ARR numbers each quarter for the past year. On the slide deck that we put out with the earnings release, there's a quarter trend in there. The trend we've seen generally in ARR has been some growth up into the right, and it's generally aligned with what we've seen on revenue. If anything, revenue can be a little more erratic because we may land some multi-year deals with subscription products like Chef or DataConnect. But absent that, I would expect the two to move in relatively consistent trend lines.

Perfect, really appreciate the help. Thanks a lot, guys.

Thanks, Ken.

Thanks.

And our next question comes from Pinjalim Bora. Go ahead.

Great. Hey guys. Congrats on the quarter. I had a question on future acquisitions. It seems like a devaluation reset might help you. But as you look forward, is there any particular area of focus for this year? Observability is one area you've been getting a lot of assets. Is that something that you might double down on, or is that the DevTools side? What are a couple of areas that you're looking at?

So Pinjalim, the reality is that across our entire portfolio, we continue to look for opportunities to either consolidate or buy complementary assets. Two out of our three acquisitions, whether it was Ipswitch about two and a half years ago or Kemp a couple of months ago, were both in the observability space. Chef was obviously in the DevOps and DevSecOps space. So I don't want to just say that we're looking at only one or two spots. We really are looking across the entire lifecycle from develop, deploy, and manage. Whether it is additional DevOps, DevSecOps, or related assets and companies that would help there, or if it is application development, front-end development tools, back-end infrastructure, and data movement. Data is another area, which we don't talk about too much, but MOVEit that came to Progress through the Ipswitch acquisition has bolstered our offering there. We used to have, and still do, the world's best real-time data access solution with DataDirect. It is literally the gold standard in the market. The acquisition of MOVEit through Ipswitch has given us the ability to securely move information in bulk. So we see ourselves continuing to work across all of these areas within the infrastructure software space, whether it is observability, application experience delivery, DevOps, DevSecOps, data access, data integration, or the actual application development and deployment of the platform itself. There's also the opportunistic aspect to it; whatever shows up as long as it makes sense. The key for us, even more than the specific domain, is about the characteristics related to how strong the product is, what's the customer base like, what's its recurring revenue, and what's the retention rate. In FY2021, we had a net retention rate of over 100%. We want to sustain extremely high net retention rates. We look for really strong businesses, and we have done this with Ipswitch, and we're confident we can achieve similar success with Kemp.

Understood. Thank you for that. One for Anthony on that retention rate point and a little bit nitpicking. Your retention rate stood at an elevated level, but sequentially, when I look at it, it did downtick a little bit. Now you're layering in Kemp, I guess. So is that a function of Kemp? If we remove Kemp, how has retention been from Q3 to Q4 for the core business? If you can talk about that and how has gross churn held up?

Sure. Thanks, Pinjalim. I think Kemp came over with approximately $40 million of ARR into the mix. When I look at where the movement was, you're right. It was not much of a movement quarter-over-quarter. Kemp might have slightly lower net dollar retention rates than the rest of our business, and we knew this coming in. From a gross perspective, they were probably in the low 80s, and from a net perspective, probably in the high 80s. That was very similar to what we saw with Ipswitch when we acquired Ipswitch back in 2019, and we viewed that as an opportunity. So there might be an ever so slight tick down when you add Kemp into the mix. However, we don't expect that it's going to be diluted over the long run; we think we're going to be able to drive the net retention rates for Kemp up to the same levels where Ipswich and a lot of our other products are. We are, like Yogesh said, very focused on maintaining those high net retention rates, and we're excited about the potential there.

Got it. Thank you very much.

And our next question comes from Anja Soderstrom. Go ahead, Anja.

Hi everyone. Thank you for taking my question and congratulations on another great quarter. A lot of good questions asked already, but just curious about price increases. Have you done any price increases? Is there room for you to do that, or is it all demand-driven for you?

So Anja, thank you. We have not had price increases and we have not implemented price increases across our portfolio. Is there an opportunity to do so? We feel that our ability to continue to drive growth is to offer better products and continue to serve our customers better and expand that way. We don't see pricing as a very important tool because, among other things, that's an infrequent tool. You use it, and it can make you look good for a short time, but the question is can we provide sustained growth? We always look for opportunities if we can do that in a sustained way, but in general, we have not done price increases and right now we're not contemplating those.

Okay. Thank you. And given you serve a lot of different end markets, was there anything that stood out to you in terms of any surprises among your customers in a specific end market?

Not really. I think we felt really good about the end markets across the board; all our geographies globally did well. Business was strong across all of our products. We’re seeing strength that is not limited to one or two things. This gives us confidence about 2022 as well. So Anja, nothing specific to highlight. It’s really been solid execution across the board by the Progress team on multiple fronts. So steady as she goes.

Well, thank you. That was all from me. Thank you.

And our next question comes from Tyler Radke. Go ahead, Tyler.

Hi. This is Boyoung Kim for Tyler Radke. Thank you for taking our question. Organic growth has been continuing to come out on the higher end of where you've been managing the business. I was wondering if you could comment on any presence or expectation of impact from a pull-forward dynamic. It seems like the strength that you've seen over the past 12 months is really durable. If you could give us any examples that have helped you internally discern what's pull-forward versus what's sustainable, that would be really helpful. Thank you.

Let me start with a little bit, and then Anthony can potentially add further as well. We did not have any pull-forward this year. We feel really good about the quality of our business this year. What we did have, though, was some pent-up demand from 2020. So it was pushed later from 2020 to 2021 that helped with the organic growth to some degree. In addition to that, we also saw strong general demand. We continue to foresee that. The pent-up demand from COVID is largely behind us. As I said, we did not segment any pull-forward or any large deals being pulled from Q1 to Q4; it has been strong, steady, disciplined execution.

I would agree with that.

Okay, thank you. I also wanted to double-click onto an earlier comment you made about improving net retention rates within the Kemp business. Since you are focused more on the cost synergy side, could you tell us more about where the expected improvement in net retention will be coming from?

Again, let me start, and then again Anthony can jump in. If you look at Ipswitch, we acquired Ipswitch in May of 2019, so about two and a half years ago. Its net retention rate was in the upper 80s. Today it’s well into the 90s. The reason is we focus on synergies, but we do them around the aspects of the business. We also emphasize new customer acquisition and operational efficiencies from the perspective of leveraging our platform. There’s a whole host of effort around the way we do our go-to-market and the way we do our product engineering that helps us retain customers while reducing costs. We continuously want to focus on retaining customers more than anything else. We have done this with Ipswitch; we carried that into Chef. Chef already had high retention rates, so we didn’t have to push it higher. We believe we can do the same with Kemp, learning from prior experiences and employing similar market approaches.

Thank you very much.

Thanks.

And we have no more questions at this time. And I'll turn it back to Yogesh for closing comments.

Hey, thanks, Darryl. Thank you, everyone, for joining us today. We couldn't be happier with our performance in FY2021, and we're excited to carry the momentum forward in FY2022. I look forward to talking to you all soon. Thank you again, and goodbye.

And thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.